Directors Report of Sanghvi Forging & Engineering Ltd.

Mar 31, 2014

To the members of the Company,

The Directors have the pleasure in presenting the 26th Annual Report
of the Company along with the audited financial statements for the year
ended March 31,2014, for your perusal, consideration and adoption.

FINANCIAL HIGHLIGHTS

The financial performance for the fiscal 2014 is summarised in the
following table

(RsIn lac)
Particulars 2013-2014 2012-2013

Income from Operations 5,292.09 4,404.93

Other Operating Income 89.79 117.63

Other Income 43.65 86.66

Total Income 5,425.53 4,609.22

Operating & Administrative Expenses 4,766.39 3,875.17

Operating Profit before Interest,
Depreciation and Tax 659.14 734.05

Interest and Financial Charges 941.33 352.23

Depreciation and Amortisation 714.51 192.72

Profit Before Tax (996.70) 189.10

Current Tax 0.23 11.06

Deferred Tax (218.46) 41.41

Short Provisions for Taxes -- --

Profit After Tax (778.47) 136.63

FINANCIAL AND OPERATIONAL PERFORMANCE

The Company has successfully started commercial production of its new
plant having installed capacity of 15,000 MTPA. Your Company has
achieved a turnover of Rs. 5,381.88 lac and a net loss of Rs. 778.47 lac
for the financial year ended March 31, 2014 as against a turnover Rs.
4,522.56 lac and net profit of Rs. 136.63 lac respectively during the
previous year, representing a topline growth of 19%.

Depreciation and amortisation charge increased from Rs. 192.72 lac in
2012-13 to Rs. 714.51 lac on account of the capitalisation of the new
project cost during the FY 2013-14.

Interest charges increased from Rs. 352.23 lac to Rs. 941.33 lac due to
repayment of loan in relation to the new project.

Employee benefit expenses increased from Rs. 290.95 lac in 2012-13 to Rs.
376.22 lac, resulting an increase of 29.31%. This increase in
intellectual capital indicates the investment by the Company in
attracting experienced professionals in the organisation.

The performance of the Company during the year indicate the
future-preparedness of the organisation and strength in its business
model, towards a sustainable future.

OUTLOOK

The Company continued its focus on strengthening local manufacturing
capabilities. However, it also analyzed the trends in the steel
industry and adapted to rapid development occurring in the world of
steel. The Company has adopted strategic measures to minimise the
adverse macro economic implications.

The Company has taken a number of steps to sustain its leadership
position in the market and has been strengthening its relationships
with its customers. In addition it is also making constant efforts to
add new customers and widen its customer base.

Your Company has also been in touch with major supplies so to ensure
availability of all critical inputs on time does not pose any problem
in future.

The combination of additional capacity of our new plant and integration
has had a positive impact on the Company''s operating margins. Our new
plant becomes fully operational this year and your Company believes to
strengthen its topline and margins in the coming years. We have
received all approvals from different customers that validate our
product quality.

SHARE CAPITAL

The Company on February 19, 2014 allotted 600,000 Equity Shares of
nominal value of Rs. 10/- each at a price of Rs. 37.50/- per equity share,
including premium of Rs. 27.50/- per equity share to Promoters of the
Company against an option attached to the Warrants to convert each
warrant into fully paid up Equity Share, exercised by them with respect
to 600,000 Warrants out of 1,200,000 Warrants allotted to them on May
28, 2013 on preferential basis in accordance with approval of
shareholders under Section 81, 81(1A) of the Companies Act, 1956 in the
Extraordinary General Meeting held on April 2, 2013.

DIVIDEND

The Directors of your Company express their inability to recommend any
dividend for the FY 2013-14 due to the current financial situation of
the Company. However your Company is harbouring a positive outlook for
the next fiscal with the commencement of commercial production and good
returns in terms of revenue and profitability.

CAPACITY

The total installed capacity of the 15,000 MTPA for new plant and 3,600
MTPA for old plant. With this upgradation, the Company is among the few
in its industry to be able to manufacture a single-piece forging up to
40 MT. The

Company''s new production facility is equipped with state- of-the-art
technology from renowned suppliers which has resulted into enhanced
superior quality of the products, reduced dependency on human labour,
lower production costs and higher capacity utilisation which gives the
Company a much needed competitive advantage over the other players.

WARRANTS

During the year the Company has converted 600,000 Warrants out of
1,200,000 Warrants allotted to Promoters into 600,000 Equity Shares
under preferential allotment at meeting held of Allotment Committee of
the Company on February 19, 2014. The Company has obtained In Principal
approval for listing of the Shares from National Stock Exchange of
India Limited on March 21,2014 and BSE Limited on April 7, 2014. The
Company has also completed necessary formalities from Central
Depository Services (India) Limited and National Securities Depository
Limited in these regard.

The Board of Directors of your company has its meeting held on July 14,
2014, inter alia has decided to issue 1,000,000 (Ten Lac only)
convertible equity warrants of Rs. 45 each which are convertible into one
Equity Share of the Company of Rs. 10 each per equity warrants at a price
of Rs. 45 per Equity Share (i.e. premium of Rs. 35 per Equity Share) to the
promoters and promoter group on preferential allotment basis.
Subsequently Extra ordinary General Meeting held on August 14, 2014 for
shareholders'' approval.

CREDIT RATING

The credit rating of the Company has been revised from CARE BB to CARE
BB- for its long-term bank facilities and reaffirmed CARE A4 for its
short-term bank facilities. The revision in the credit rating arises
due to delay and cost overruns in the new project. With the stabilised
production in the existing as well as in the new plant the Company has
started getting healthy orders for new and existing plant, the Company
expects to improve its ratings in the coming year.

INVESTORS'' RELATIONS AND GRIEVANCES

All the shareholders''/investors'' complaints/grievances received during
the financial year have been resolved and there were no investor
grievances pending, as on March 31, 2014. A confirmation to this effect
has been obtained from the Company''s Registrar and Share Transfer Agent
and authentication of the same can be verified from the SCORES website
at http://scores.gov.in. The details regarding investor complaints
received and resolved during the year are mentioned in the report on
Corporate Governance annexed to this report.

CONSERVATION OF ENERGY

The Company has taken several steps towards conserving energy through
its ''Sustainability'' initiatives, disclosed separately in the Annual
Report. The information on Conservation of Energy as required under
Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988 is provided in ''Annexure A'' of this Annual
Report.

The Company has continuously exercised effective safety, health and
environment policies. Water and air pollution control measures are
successfully operated and industrial trade effluents are used for
gardening. The tree plantation at the factory site is maintained
properly and the same shall be duly taken care of at our new plant.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed review of operations, performance and future outlook of the
Company is covered under a separate Annexure to this report as
Management''s Discussion & Analysis.

REPORT ON CORPORATE GOVERNANCE

A separate Section on Corporate Governance is included in the Annual
Report and the Certificate from M/s Samdani Kabra and Associates,
Company Secretaries, Vadodara, the Company''s Secretarial Auditors
confirming the compliance of conditions on Corporate Governance as
stipulated in Clause 49 of the Listing Agreement with Stock Exchanges
is annexed thereto.

FIXED DEPOSITS

Your Directors report that the Company has not accepted any deposits
during the current financial year.

INSURANCE

Your Directors confirm that all the properties and insurable interests
of the Company, including buildings, plant and machinery and stocks
have been adequately insured.

DIRECTORS

In terms of Section 149, 152 and any other applicable provisions of the
Companies Act, 2013, effective from April 01, 2014, Independent
Directors are not to be included in the total number of directors of
the Company for the purpose of determining the directors liable to
retire by rotation. Accordingly, Shri Jayanti B. Sanghvi retires at the
forthcoming Annual General Meeting and being eligible offers herself
for re-appointment.

Shri Ram Swaroop Kaushal, Dr. Baba Karnire Pai, Dr. Ram Chandra Prasad
and Shri Shantaram Surya Prakasarao Yarlagadda, Directors, whose
present term of office is liable to determination by retirement of
Directors by rotation under the applicable provisions of the Companies
Act, 1956, being eligible, offer themselves for appointment, in terms
of Section 149 and other applicable provisions of the Companies Act,
2013, as Independent Directors of the Company. Necessary notices have
been received from members proposing them as candidates for the office
of Directors of the Company.

Dr. Jyoti V. Menghani has appointed as additional director of the
Company at Board Meeting held on August 13, 2014 pursuant to Sections
149, 150, 152,161 and other applicable provisions of the Companies Act,
2013.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 217(2AA) of the Companies
Act, 1956, with respect to Directors'' Responsibility Statement, your
Directors confirm that:

(i) In the preparation of the accounts for the financial year ended
March 31, 2014; the applicable accounting standards have been followed
along with proper explanation relating to material departures, if any

(ii) The accounting policies selected have been applied consistently
and judgments and estimates made are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the
end of the financial year and of the profit or loss of the Company for
the year under review

(iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities

(iv) The annual accounts have been prepared on a going concern basis

AUDITORS AND THEIR REPORT

The comments of the Auditors in their report and the notes forming
parts of the accounts are self explanatory and need no comments.

M/s Shah & Bhandari, Chartered Accountants, the Company''s Statutory
Auditors who retire at the conclusion of the ensuing Annual General
Meeting and being eligible, offer themselves for reappointment.

The Directors recommend the reappointment of M/s Shah & Bhandari and
shall seek the approval of the members at the Annual General Meeting
to authorise the Board to Directors to fix their remuneration.

COST AUDITOR

The Board of the Directors after reviewed by the Audit Committee has
appointed M/s Diwanji & Associates, Cost Accountants as Cost Auditors
for the FY 2013-14 for carrying out the cost audit of the product of
the Company.

INTERNAL AUDITOR

Your Company has appointed M/s Jain & Hindocha, Vadodara, Chartered
Accountants as Internal Auditors of the Company for the FY 2013-14. The
Audit Committee of the Company periodically reviews the reports of the
Internal Auditors.

CORPORATE SOCIAL RESPONSIBILITY

The Company, having regard to its size and scope, is generally
compliant with relevant guidelines on Corporate Social Responsibility
(CSR), even though not presently applicable to the Company. The Board
has also constituted a committee at their Board Meeting held on May 26,
2014 in accordance with Section 135 of the Companies Act 2013 to mentor
and monitor CSR activities.

The call of fulfilling our CSR activities has sincerely been taken by
us and we accord as much significance to CSR as any business project
and the results are there for everyone to see. Dedicated need-based
interventions have been initiated in areas where we operate. Enabling
local people by fostering self-reliance is the motive behind our
community development efforts.

Therefore, our interventions are structured around promoting education
as well as informal education of Tribal Children, generating
livelihood, empowering women and overall, social mobility.

Your Company is also constantly making efforts to maintain a greener
planet and reduce its carbon footprint as much as possible. Through
financial contributions and active participation of employees, your
Company provides support to non-profit organisation that address
community sustainability. Your Company contributed through donations,
rain water harvesting sponsorship and by participating in various
activities.

HUMAN RESOURCES

The Company''s strength lies in its team of competent and motivated
personnel. This made it possible for your Company to make significant
improvements and progress across all areas of its working. The
employees have from time to time taken up the challenge to improve the
performance of plants through efficiency, productivity and economy.
Your Directors are happy to place on record their sincere appreciation
for the unstinted efforts and contribution put in by the employees of
the Company.

The Company has also continued its endeavour to impart appropriate and
relevant training to its employees at various levels with a view to
equip them to take up challenges and to enhance their performance, in
the overall interest of the Company.

During the year, the Company maintained harmonious and cordial
industrial relations. No person-days were lost due to strikes,
lock-outs among others.

Pursuant to The Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 notified on December 9, 2013, the
Company has set up a Committee to look into complaints under the said
Act. The Company has not received any complaints relating to sexual
harassment at work place from any woman employee during the year.

DISCLOSURE BY SENIOR MANAGEMENT PERSONNEL i.e. ONE LEVEL BELOW THE
BOARD INCLUDING ALL HODs

None of the senior management personnel have undertaken financial and
commercial transactions with the Company, where they have personal
interest that would have a potential conflict with the interest of the
Company at large.

PARTICULARS OF EMPLOYEES UNDER SECTION 217

There were no employees coming within the purview of the provisions of
Section 217(2A) of the Companies Act, 1956, read with the Companies
(Particulars of Employees) Rules, 1975.

ACKNOWLEDGEMENT

Your Directors express their sincere appreciation for the wholehearted
and continued support assistance and cooperation extended by the
shareholders banks, suppliers, customers, employees, and all concerned
towards the Company during the year under review.

On the behalf of the Board of Directors

Place: Vadodara Babulal S Sanghvi
Date : August 13, 2014 Chairman

Mar 31, 2012

The Directors have pleasure in presenting the 24th Annual Report of
the Company together with the Audited Financial Statements of the
Company for the year ended on March 31, 2012 for your perusal,
consideration and adoption.

Financial Highlights

A summarised statement of the standalone financial results of the
current year and that of the previous is given below:

(Rs. in Lacs)

Particulars 2011-12 2010-11

Income from Operations 4,204.76 3,426.13

Other Operating Income 868.36 595.43

Other Income 52.06 27.38

Total Income 5,125.18 4,048.94

Operating & Administrative Expenses 4,216.55 3,222.00

Operating Profit before Interest,
Depreciation and Tax 908.63 826.94

Interest and Financial Charges 141.82 155.72

Depreciation and Amortisation 71.17 64.88

Profit Before Tax 695.64 606.34

Current Tax 213.00 207.19

Deferred tax 7.01 5.66

Profit After Tax 475.63 393.49

Excess/(Short) Provision of taxation
and tax payments - 0.21

Surplus Brought Forward from
Previous Year 790.07 683.28

Balance available for Appropriation 1,265.71 1076.77

Appropriation

Issue of Bonus Shares - 286.92

Carried Forward 1,265.71 790.07

Financial and Operational Performance

Your Company has achieved a turnover of Rs. 5,073.12 lacs and a net
profit of Rs. 475.63 lacs for the financial year ended March 31, 2012
as against a turnover of Rs. 4,021.56 lacs and net profit of Rs. 393.49
lacs respectively during the previous year, representing an increase in
turnover y-o-y of 26.15% and an increased net profit y-o-y by 20.87%.
Your Company had performed at par with the expectations of directors
during the fiscal year 2011-12, considering the overall forging
industry performances in India. We hope that the Company will do the
same in future as well since the Company has having good orders
pipeline for the next year from both the domestic as well as overseas
markets. Further it is a constant endeavor to obtain additional orders
and emerge as a leading supplier in the forging industry.

Operational Progress of the New Expansion Project

The Company has been constantly expanding its operations, keeping in
sight the demands of the forging industry, market receptiveness and
other economic factors and evaluations. The Company is expanding its
business by setting up a new plant at Waghodia, Vadodara. Currently,
the project is progressing as planned and is on full swing. All the
requisite plant and machineries have been received at the site and
erection work is in full swing. As of now, 80% of the work has been
completed. Your Company has faced a few challenges like shortage of
funds due to the change in suppliers which increased the total project
cost to Rs. 132 crores. The Company has changed supplier of furnaces
for the project in order to improve fuel efficiency. The furnaces which
were earlier proposed to be purchased from the Korean supplier have
been now purchased from German supplier which has increased the project
cost by Rs. 13 crores. To meet the requirements of a fund shortage, the
Company had to take a fresh term loan to the tune of Rs. 8 crores
aggregating Rs. 80 crores. There are other various challenges which the
Company will have to face in the near future, but we believe that we
will overcome these bottlenecks and will commission the project soon.

Dividend

In order to conserve the resources for meeting the Company's expansion
plans, the Directors of your Company express their inability to
recommend any dividend for the Financial Year 2010- 2011.

Credit Rating

Your Company continues to have credit rating of CARE BBB for its
long-term bank facilities and CARE A3 for its short-term bank
facilities.

Investors' Relations and Grievances

All the shareholders'/investors' complaints/grievances received during
the financial year have been resolved and there were no investor
grievances pending as on March 31, 2012. A confirmation to this effect
has been obtained from the Company's Registrar and Share Transfer
Agent. The details regarding investor complaints received and resolved
during the year are mentioned in the report on Corporate Governance
annexed to this report.

Conservation of Energy

Energy saving in terms of electricity consumption is our prime concern.
The Company utilises several means to conserve energy. Well-planned
preventive maintenance measures improved our operational efficiency.
The details relating to the same is annexed in "Annexure A" to the
report.

Water and air pollution control measures are optimum and industrial
trade effluents are used for gardening. Tree plantation at the factory
site is maintained properly and the same shall be duly taken care in
our new plant.

Management Discussion and Analysis Report:

A detailed review of operations, performance and future outlook of the
Company is covered under a separate Annexure to this report as
Management discussion and analysis.

Report on Corporate Governance

A separate Section on Corporate Governance is included in the Annual
Report and the Certificate from M/s. S. Samdani & Associates, Company
Secretaries, Vadodara, and the Company's Secretarial Auditors
confirming the compliance of conditions on Corporate Governance as
stipulated in Clause 49 of the Listing Agreement with Stock Exchanges
is annexed thereto.

Fixed Deposits

Your Directors report that the Company has not accepted any deposits
during the current financial year.

Insurance

Your Directors confirm that all the properties and insurable interests
of the Company, including buildings, plant and machinery and stocks
have been adequately insured.

Directors

At the forthcoming Annual General Meeting, Shri Babulal Sanghvi and
Shri Vikram Sanghvi will retire by rotation and being eligible; offer
themselves for reappointment in terms of the Articles of Association of
the Company. A brief resume/particulars relating to them are given
separately under the report on Corporate Governance. Your Directors
recommend their reappointment at the forthcoming Annual General
Meeting.

Directors' Responsibility Statement

Pursuant to the requirements under Section 217(2AA) of the Companies
Act, 1956, with respect to Directors' Responsibility Statement, your
Directors confirm that:

(i) In the preparation of the accounts for the financial year ended
March 31, 2012; the applicable accounting standards have been followed
along with proper explanation relating to material departures, if any

(ii) The accounting policies selected have been applied consistently
and judgments and estimates made are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the
end of the financial year and of the profit or loss of the Company for
the year under review

(iii) Proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities

(iv) The annual accounts have been prepared on a going concern basis

Auditors and Their Report

Except of the following, comments of the auditors in their report and
the notes forming part of the accounts are self- explanatory and needs
no comments:

Auditors have qualified their report regarding 'classification of
certain liabilities into current and non-current' which is a different
view. In light of the revised schedule VI of Companies Act; this being
the first year of implementation of revised Schedule VI due to lack of
clarification and management

perception, there was a difference of opinion on current vs.
non-current classification only which would be resolved in current
financial year, as such the classification does not have any material
impact on the financials of the Company, which auditors have also
pointed out in their report.

M/s. Shah Bhandari and Associates, the Company's Statutory Auditors who
retire at the conclusion of the ensuing Annual General Meeting and
being eligible, offer themselves for reappointment.

The Company has received a certificate from the auditors to the effect
that their reappointment if made, would be in accordance with the
provisions of Section 224(1B) of the Companies Act, 1956.

The Directors recommend the reappointment of M/s Shah Bhandari &
Associates and shall seek the approval of the members at the Annual
General Meeting to authorise the Board to Directors to fix their
remuneration.

Cost Auditor

The Central Government vide its order dated June 30, 2011 directed that
audit of cost accounts maintained by the Company relating to the steel
product for the year ended March 31, 2012 be conducted by the Auditors
having qualification as prescribed in Section 233B(1) of the Companies
Act, 1956. Accordingly the Board had appointed M/s Diwanji & Associates
as Cost Auditor for carrying out the cost audit for the FY 2011-12.

Corporate Social Responsibility

The call of fulfilling our Corporate Social Responsibility (CSR) has
sincerely been taken by us and we accord as much significance as any
business project for CSR and the results are there for everyone to see.
Dedicated need-based interventions are initiated in areas where we
operate. Enabling local people by fostering self-reliance is the motive
behind our community development efforts. Therefore, our interventions
are structured around promoting education, generating livelihood,
empowering women and overall, social mobility.

Your Company is also constantly making efforts to maintain a greener
planet and reduce the carbon footprint as much as possible. Through
financial contribution and active participation of employees, Your
Company provides support to programmes and non-profit organisations
that address community sustainability. Your Company contributed towards
Corporate Social Responsibility through donations, financial
contribution, and sponsorship and by participating in various such
activities. Details of the some of these activities undertaken by the
Company during the year are as under:

1. Donation to Vadodara GramyaJilla Traffic Education Trust Vadodara
GramyaJilla Traffic Education Trust, Vadodara has organised a short
film festival to increase the awareness about the traffic rules which
has been sponsored by the Vadodara Traffic Police. Your company has made
contribution to said trust by way of donation. Your Company has always
making efforts to participate such programs for awareness of the public
and reduce road accidents.

2. Donation to Hari Om Seva Trust for medical help to the
underprivileged

Your company is always trying to support the socially and economically
weaker section of the society. As a part of the endeavor for
continuously supporting such noble works, the Company has donated a
contribution to Hari Om Seva Trust for medical help to the
underprivileged which is an NGO & registered Charitable Trust rendering
immaculate human services for the needy patients. The Trust provides
the financial help in the form of their medical expenses and guiding
patients to their doctors and wards. All funds collected by the trust
are fully utilised for poor patients. They mainly providing their
services at SSG Hospital, Vadodara which comprise of guiding poor
illiterate patients to different department of the hospital like OPDs,
Wards, Laboratory, RMO office, Emergency wards etc. Supplies of
medicines to needy poor patients who are not capable to buy etc. They
have made arrangement with other local Charitable Medical store for
medicines and same is given at subsidised rates as compared to market
rates.

3. Sponsored the CEP Course on Heat Treatment and Failure Analysis of
Gears

Your company has sponsored the CEP Course on Heat Treatment and Failure
Analysis of Gears organised by IIT, Bombay. The objective behind to
sponsor these type of course is not only to identify those failure but
also to determine and correct those failure which can lead to many
potentially disastrous consequences, including poor product quality,
necessary repair or component or equipment replacement, production
downtime losses, environment impact and even loss of life. The course
also dealt with many other aspects like steel failures arising during
thermal processing, such as forging casting, heat treatment, welding
and other and provided detailing potential failure that may occur
during thermal processing and the identification of their root cause,
even if it is not specifically the thermal process being considered.
This course not only discuss various causes of a failure and its
identification but also integrates this discussion with the metallurgy
of the process by providing one comprehensive resources.

Human Resources

The Company's strength lies in its team of competent and motivated
personnel. This made it possible for your Company to make significant
improvements and progress in all areas of its working. The employees
have from time to time taken up the challenge to improve the
performance of plants through efficiency, productivity and economy.
Your Directors are happy to place on record their sincere appreciation
for the unstinted efforts and contribution put in by the employees of
the Company.

The Company has also continued its endeavour to impart appropriate and
relevant training to its employees at various levels with a view to
equip them to take up the challenges ahead and to enhance their
performance in the overall interest of the Company.

During the year, the Company maintained harmonious and cordial
industrial relations. No man-days were lost due to strike, lock out
among others.

Disclosure by Senior Management Personnel i.e. one level below the
board including all HODS

None of the Senior Management personnel has financial and commercial
transactions with the Company, where they have personal interest that
would have a potential conflict with the interest of the Company at
large.

Particulars of Employees Under Section 217

There were no employees coming within the purview of the provisions of
Section 217(2A) of the Companies Act, 1956, read with the Companies
(Particulars of Employees) Rules, 1975.

Acknowledgement

Your Directors express their sincere appreciation for the wholehearted
and continued support assistance and cooperation extended by the,
shareholders banks, suppliers, customers, employees, and all concerned
towards the during the year under report.